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1 LESSONS FROM THE PENANG GROWTH POLE IN MALAYSIA MOZAMBIQUE: INCLUSIVE GROWTH SEMINAR MAPUTO FEBRUARY 10, 2011 FINANCE AND PRIVATE SECTOR DEVELOPMENT.

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Presentation on theme: "1 LESSONS FROM THE PENANG GROWTH POLE IN MALAYSIA MOZAMBIQUE: INCLUSIVE GROWTH SEMINAR MAPUTO FEBRUARY 10, 2011 FINANCE AND PRIVATE SECTOR DEVELOPMENT."— Presentation transcript:

1 1 LESSONS FROM THE PENANG GROWTH POLE IN MALAYSIA MOZAMBIQUE: INCLUSIVE GROWTH SEMINAR MAPUTO FEBRUARY 10, 2011 FINANCE AND PRIVATE SECTOR DEVELOPMENT

2 2 Medan Bangkok Jakarta Hong Kong Singapore KL NEW TOWNSHIP INDUSTRIAL PARK CITIES/TOWNS EXISTING ROAD RAILWAY KEDAH Beach Resorts PENANG ISLAND PORT Penang International Airport Bayan Lepas Industrial Park Batu Kawan Bukit Minyak PRAI Kulim High-Tech Park Taipei Where is Penang?

3 3 The Penang Growth Story Trading Entrepot Loss of free port status Declining trade Manufacturing Global manufacturing hub and tourism destination Services Hub 2001-current Innovation economy and business and services hub

4 Penang’s Economic Transformation GDP by sector (1970) GDP by sector (2010) US$500 millionUS$10,000 million

5 Success of the Growth Pole Strategy Population (‘000) Per capita income (US$) Unemployment rate (%)163 Poverty rate (%) Infant Mortality Rate (%)380.4

6 Value Roadmap – Industrial Transformation Quality&Automation R&DSub-con Support Centres GlobalCompetition Basic Industries Agriculture Machine Shop Service Machine Shop Service General Maintenance General Maintenance Trade Trade 60s70s80s90s 00s & beyond Low Value Added Low Value Added Exports Exports Textile / Garments Textile / Garments Labour Intensive Labour Intensive Electronic Component Electronic Component Assembly Assembly Test Test Tool & die Tool & die Machine Integration Machine Integration Plastic Moulding Plastic Moulding Custom Services Custom Services Improvement Projects Improvement Projects Semiconductor Semiconductor Manufacturing Manufacturing Consumer Electronics Consumer Electronics Automation Automation TQC TQC Investment in high- Investment in high- tech machine shops tech machine shops Drive components Drive components production production Test auto handlers Test auto handlers PCB assembly PCB assembly automation automation Manufacturing sub-con Manufacturing sub-con General Manufacturing General Manufacturing machinery machinery Semicon process Semicon process Test system Test system development development Supply chain Supply chain management management Disk drives Disk drives Base Software Base Software Design Companies Design Companies Contract Contract Manufacturing Manufacturing Business Management Business Management Outsourcing Outsourcing Service Contract Service Contract R&D R&D Software Software Global Hub Global Hub Alternative sale Alternative sale Adapted from “Technology Roadmap for the Electrical and Electronic Industry of Penang” MNC SMI Value Add Version 1 Version 2 MNCs Operational HQ Logistics / Distribution Centres BPO / SSO Design & Development Centres Local Companies Local Companies OEM to ODM OEM to ODM Market Outreach beyond Malaysia / MNCs Market Outreach beyond Malaysia / MNCs Growth of Design / R&D Companies Growth of Design / R&D Companies Version 3 ?

7 7 Why is the Penang story relevant? Penang, Malaysia (1970)  Population: 0.8 million  Area: 1,030 sq. km  Income per cap: $400 Nacala, Mozambique (2011)  Population: 0.3 million  Area: 1,300 sq.km  Income per cap: $440 * Similar Development Challenges Post conflict: stability and equitable growth High unemployment : attract investments Optimize potential of port facilities Enhance manufacturing competitiveness Develop tourism potential and protect assets Improve connectivity : infrastructure Strengthen National – Provincial partnership * GNI per capita ATLAS method, WDI 2010

8 Penang Growth Pole Strategy PeriodNational PlanState PlanOutcomes st Malaysia Plan Munro Report Agriculture, health and education focus nd Malaysia Plan to 5th Malaysia Plan; New Economic Policy Penang Master Plan Export-led manufacturing; Global orientation th Malaysia Plan and 7th Malaysia Plan First Penang Strategic Development Plan Solid GDP and FDI growth but few local linkages th Malaysia Plan and 9th Malaysia Plan Second Penang Strategic Development Plan Faltering growth and competitiveness; middle income trap th Malaysia Plan (current) onwards Northern Corridor Economic Region Blueprint World class economic region: innovation and talent

9 9 Penang Growth Pole Strategy Investments Infrastructure and Incentives Ingenuity and Institutions

10 INGENUITY Penang Master Plan (1971) set out the long-term growth strategy, in a market economy setting, utilizing available resources for export-led manufacturing and tourism (global orientation) Penang Strategic Development Plans 1 and 2 built on this strategy National 5 Year Plans provided overall policy framework and resource envelope for public expenditure KEY LESSONS 1.Develop a long term shared vision based on challenges and opportunities 2.Target strategic sectors but remain flexible to new prospects

11 Lessons from the Penang Strategy 1.Lead implementation agency: coordination and One Stop Shop roles 2.Sector growth strategies: manufacturing, tourism 3.Integrated spatial planning: SEZs, new growth centers, housing, urban renewal and land banks 4.Infrastructure investment planning: logistics, utilities 5.Skills development: incentives and PPPs

12 INSTITUTIONAL REFORMS Penang Development Corporation Enactment (1971) to spearhead socio-economic development, poverty reduction, job creation and improvement of quality of life. Federal Industrial Development Authority Act (1965) for investment promotion and facilitation Free Trade Zone Act (1971) Promotion of Investment Act (1986) for incentives KEY LESSONS 1.A capable lead agency for effective implementation 2.Federal-State- private sector communication and trust is critical

13 Enabling Role of the Lead Agency Focal point for strategy, planning, communications, intra-agency coordination and consensus building First point of contact for investors: information is key Business facilitation: from start up to closing (coordination and follow through role) Regular dialogue with investors: address concerns related to infrastructure, regulations, permits, approvals, Customs, Immigration, security and Municipal services Investment promotion and business matchmaking

14 14 Federal Government MITI / MIDA, MOF Local Investors Penang Development Corporation (PDC) GLOBAL /REGIONAL MARKETS SYNERGY FOR GLOBAL COMPETITION: THE PENANG MODEL Foreign Investors Capital, Technology I nstitutions I ncentives I nfrastructure SEZs Business S ervices Skills I nitiative I ngenuity

15 INFRASTRUCTURE AND INCENTIVES Demarcation of roles and responsibilities for infrastructure development and maintenance: Federal, State, Local Authority and Development Agency Free Trade Zone Act (1971) for free zone incentives Promotion of Investment Act (1986) for sector/location-based incentives Business environment is more important than financial incentives : transparent and predictable processes KEY LESSONS 1.Investment plan with accountability for delivery 2.Software is more important than hardware

16 Good Hearing and a Light Touch # Innovative local economies are built one conversation at a time : need people close to the action who have good hearing, patience and a light touch Good governance pays in the long run Attract and retain the best and brightest talent Work with what you have: learn, copy, experiment and innovate - second-best solutions do work! Sustainable Growth = Competitive Edge # # F. Hutchinson, Penang Economic Monthly, July 2010


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